CRISIL Ratings reaffirms Ramco Inds 'A1+' rating

CRISIL Ratings stated that the The revenue improved by 11% to Rs 896 crore in the first half of fiscal 2025 from Rs 803 crore in the second half of fiscal 2024. The growth was driven by 4% increase in the building products segment with major contribution from its subsidiary and steep increase in sales of the textile segment to satisfy commitments under advance license scheme for import of raw materials.

Operating margin improved to ~11% in the first half of fiscal 2025 from 10.32% in the first half of fiscal 2024 because of better realisation from the boards segment and increased revenue share in overall revenue besides recovery in the cotton-yarn spread.

Demand for asbestos will likely remain steady with increase in rural income over the near-to-medium term and increased government push towards rural housing. The board business is likely to fare well due to healthy demand, while the textile business segment will benefit from better export.

These factors are expected to contribute to revenue growth of 10-12% over the medium term.

The operating margin is expected to remain stable at 10-11% mainly due to intense competition from substitute products and pricing competition from peers, which will likely be partially offset by stable asbestos fibre cost.

RIL has planned to invest Rs 200 crore in fiscal 2026 to set up a board plant in Madhya Pradesh and is expected to avail debt of Rs 150 crore for the project, which was delayed due to requisite approvals and uncertain market conditions.

However, with improving demand for board, the company will likely complete the planned capital expenditure (capex) by fiscal 2026, while revenue generation will commence from fiscal 2027. The project will increase board capacity by 40-50%.

Nevertheless, the financial risk profile will likely remain healthy post factoring additional project debt of Rs 150 crore due to existing low debt on its balance sheet.

The rating continues to reflect the established position of the company in the domestic asbestos cement (AC) sheet (ACS) roofing market, its strong presence in the Sri Lankan market and a healthy revenue diversity through presence in textiles, calcium silicate board and wind power.

The rating also considers the company's healthy operating efficiency and strong financial risk profile, driven by steady cash accrual, prudent working capital management and moderate expansion plans. The significant value of investments in the listed Ramco group companies, including RCL, supports RIL's financial flexibility.

These strengths are partially offset by high dependence of the AC roofing business on rural spending, availability and pricing of key raw material (asbestos fibre), exposure to intense competition from peers as well as from substitute steel products.

The company is also exposed to regulatory risks on the manufacture and use of asbestos as well as change in policies of key asbestos-producing nations, given that India imports its entire asbestos requirement.

Ramco Industries manufactures AC roofing sheets in India and Sri Lanka. The company also manufactures calcium silicate board in the building products division and sells cotton yarn of 4-300s counts. It has 10 manufacturing facilities across India for the building products division, one facility in Rajapalayam, Tamil Nadu, for manufacture of cotton yarn, and windmills in Tamil Nadu, Karnataka and Gujarat.

For the first half of fiscal 2025, RIL, on consolidated basis, reported profit after tax (PAT) of Rs 49 crore (Rs 40 crore in the corresponding period of fiscal 2024) on net revenue of Rs 896 crore (Rs 803 crore).

The scrip had advanced 1.27% to end at Rs 311.15 on the BSE today.

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